abcam plc interim results for the six months ended 31...

2

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Abcam plc, 2018/19 Interim Results Presentation, 4 March 2019

33

Becoming the most influential company for life scientists supporting research, diagnostic and therapeutic discovery


Abcam launches new

PBS-only antibodies,

enabling more flexible

research.”

“

Abcam and the LouLou

Foundation partner to

develop key research

tools for CDKL5

deficiency disorder.”

“Abcam acquires Calico

Biolabs, expanding our

expertise in recombinant

rabbit monoclonal antibody

development and custom

solutions capabilities.”

“

“ Roche announces the global launch

of the VENTANA pan-TRK (EPR17341)

Assay, the first automated in vitro

diagnostic (IVD) IHC assay to detect

tropomyosin receptor kinase (TRK)

proteins in cancer.”

“Leica Biosystems announce

the global launch of a new PD‐L1 antibody (clone 73‐10)

for use on their fully

automated BOND IHC and

ISH staining platform.”

QIAGEN (Suzhou) and Abcam

sign strategic MoU to co-develop

companion diagnostic (CDx)

and in vitro diagnostic (IVD)

reagents and kits for the Chinese

market.”

“

October 2018

January 2019

November 2018

December 2018

November 2018

January 2019

http://www.calicobio.com/home.html

44

Serving life scientists to achieve their mission fasterAbcam and the Michael J. Fox Foundation for Parkinson’s Research

Accelerating

Parkinson's research through the

development and

provision of critical

reagents to key targets


http://www.abcam.com/reagents/abcam-and-the-michael-j-fox-foundation

H12019 Financial Results

Solid financial performance delivered in H1 2019

Gross margin

Gross margin:

70.2%

(H1 2018: 69.8%)

+40bpts

Catalogue Revenue growth1

Reported revenue

£117.0m, +11.2%

(H1 2018: £105.2m)

+10.5%

Total Revenue

growth1

Reported revenue

£124.7m, +10.8%

(H1 2018: £112.5m)

+10.0%

Dividend growth

Interim dividend

per share: 3.55p

(H1 2018: 3.42p)

+3.8%

Adjusted diluted

EPS3 growth

Adjusted diluted

EPS 16.3p

(H1 2018: 15.5p)

+5.2%

Adjusted

EBITDA2 growth

Adjusted

EBITDA £44.4m

(H1 2018: £42.7m)

+4.0%

1. At constant exchange rates (applying prior period’s actual exchange rates to this period’s results)

2. Excludes system and process improvement costs, one-off costs associated with the new Group headquarters

3. Excludes system and process improvement costs, one-off costs associated with the new Group headquarters, amortisation of acquisition related intangible assets and the tax effect of these

adjusting items


6

7

Product revenue analysis:Recombinant antibody and Immunoassay growth support double-digit catalogue growth

H1 2019

£m

H1 2018

£m

Constant

Currency

growth*

Catalogue revenue – product split:

Primary and Secondary Antibodies 93.5 85.2 9.3%

of which Recombinant antibodies 27.2 22.4 21.1%

Other products1 23.5 20.0 15.6%

of which Immunoassay products 8.8 7.0 25.8%

Catalogue revenue sub-total 117.0 105.2 10.5%

Custom Products and Licensing (CP&L) revenue2 7.7 7.3 2.3%

Total revenue 124.7 112.5 10.0%

1 Includes kits and assays, proteins, peptides, lysates and AAAI products sold for research use

2 Includes royalty income, custom services, IVD/IHC, and licensing revenue

* At constant exchange rates (applying prior period’s exchange rates to this period’s results)


8

Americas EMEA China Japan Region Rest of Asia

Pacific

H1 2019 Catalogue CER revenue growth rate, %1

1 Catalogue revenue growth at constant exchange rates (applying prior period’s exchange rates to this period’s results)

Figures in parenthesis indicate percentage of total reported catalogue revenue in H1 2019

Regional revenue analysis:China remains fastest growing major region

Impacted by local market

dynamics / volatility in academic

funding environment


9

42.7 44.5

-

0.8

1.0

9.1

3.1

8.7

35.0

37.0

39.0

41.0

43.0

45.0

47.0

49.0

51.0

53.0

55.0

H1 FY2018

Adj. EBITDA

Incremental gross

profit

R&D RDEC /

capitalisation

benefit

Underlying R&D

increase

Scaling and volume

related costs

(SG&A)

New employee

share schemes

H1 FY2019

Adj. EBITDA

£'m

Adjusted EBITDA1 bridge:Investing for long-term growth

1. Excludes system and process improvement costs and costs associated with the Group’s new headquarters


~2/3rds scaling and

growth investment

~1/3rd volume related

and inflationary

10

Ongoing investment in infrastructure to support scalability

Flexible and scalable IT platform

Upgraded and expanded operations

• New global HQ on Cambridge Biomedical Campus completed

on time and on budget

– All UK employees on single site for first time in over a decade

– State of the art, purpose built facilities

– Total capital investment £24.4m (£21.8m spent up to H1)

• New EU based fulfilment centre to be operational by end March

• HR and customer contact modules launched

• Executing phased roll-out of remaining modules

• Implementation of finance and non-stock procurement

modules expected Summer 2019

• H1 2019 spend: £7.8m (of which capex £5.8m)

• FY estimated spend: ~£16m (Capex ~£12m)

10


11

Cash flow analysis:Continued strong cash generation funding investment cycle

H1 2019

£’m

H1 2018

£’m

Operating cash flows before w/c 41.0 39.5

Change in working capital 1.2 (3.1)

Tax paid (5.8) (3.5)

Net finance (costs) / income 0.3 0.1

Investing activities (27.3) (11.2)

Financing activities (17.2) (14.3)

Net change in cash and term deposits (7.8) 7.5

Effect of FX rates 0.8 (0.7)

Opening cash and term deposits 90.2 84.8

Closing cash and term deposits 83.2 91.6

Cash conversion ratio1 95% 85%

• Financing activities mainly related to the

payment of the final FY2018 dividend

• Main investing activities:

– ERP investment £5.9m

– New Cambridge HQ £7.2m (£3.0m net of

funds held in escrow)

– New product development £3.9m

– Global lab equipment £2.0m

– £11.9m related to the Spring licensing

agreement

1. Operating cash flow after w/c / Adjusted EBITDA


RCF put in place to support acquisition strategy

• RCF put in place 1st February to provide

additional financial flexibility for future corporate

transactions

• £200m with a £100m Accordion feature

• Initial term of 3 years, with option to extend by a

further 2 years

12

Outlook and financial guidance

Total revenue growth

(constant currency)1

FY2018/19e

~10%

Adjusted EBITDA margin2

~35%

1 At constant exchange rates (applying prior period’s exchange rates to this period’s results).

2 Excludes system and process improvement costs relating to Oracle ERP implementation

H1 2019 actual

10.0%

35.6%


• Outlook for biomedical research funding in

major markets remains robust, with the

exception of Japan

• Long-term investments support double-digit

growth trajectory with attractive margins

• Short term continues to be impacted by

Japan and phasing of CP&L custom service

revenue

FY2018/19eH1 2019 actual

Progress against our goals

14

We remain on track to deliver our strategic goals for the year

1) At constant exchange rates (CER, applying prior period’s exchange rates to this period’s results).

2) July-Oct 2018 (tNPS provider changed during October 2018)

FY 2019 Target 20%+ 20%+

Strategic KPIs

Customer

engagement:

transactional

NPS

57-67%

Recombinant

antibody

revenue

growth1

Immunoassay

growth1


We are making good progress towards our FY2019 objectives

• ~1,500 recombinant

antibody products

published 1

• Knockout validation

initiative now in

over 1,800 products

• Two website

releases deployed

• China growth v.2.0

project launched

• >600 immunoassay

kits published

online2

• First multiplex

immunoassay

customer cohorts

• Continued

development of

‘Abcam Inside’

pipeline, with 75+

projects initiated

• IT implementation

progressing to plan

• Global employee

share scheme

launched

• Move to new UK HQ

complete

• Further senior team

appointments

made

• New UK HQ

delivered on time

and budget

• First wave of

manufacturing

automation

implemented

• Contingency plans

initiated for no-deal

Brexit

• Bolt-on acquisition

of Calico Biolabs

• EVP of Corporate

Development

appointed

• Attractive pipeline

of opportunities

1) Includes primary antibodies, primary conjugates and PBS only (azide free) formulations

2) Includes ELISA kits, matched antibody pair kits, Fireplex multiplex panels and PBS only (azide free) formulations


15

Leadership in research use markets is strengthening our competitive position in an $8bn addressable market

Research Use (RUO) Proteomic Tools Antibody development for Dx/Tx use

$3bn ~4% pa $5bn 5-8% pa

Protein binding reagents

Primary antibodies

Secondary antibodies

Immunoassays

Related reagents

Kits(1)

Proteins, peptides,

lysates

Biochemicals

(1) Includes Cellular Activity Kits, Epigenetic Kits, miRNA Kits

Diagnostic applications

Companion Dx

IVD

Point of Care

Disease treatment

Biological

therapeutics

Estimated Total Addressable Markets

1 2

‘Abcam Inside’


16

17

Across our markets we are pursuing four large growth opportunities

17

Note: Chart for illustrative purposes only. Not to scale

Chin

)

1998 Today2013 2023 2033

Influence

on research

and patient

lives


18

Bolt-on acquisition of Calico completed in January

• small portfolio of CALTM clones optimised for IHC antibodies

against key Immuno-oncology targets

• complementary propriety technology allows development of

high quality antibodies without the use of traditional cell fusion

and hybridoma methods

Aligned with our M&A criteria:

✓ “Gold standard” reagents to study biological pathways

✓ potential to drive further growth via digital platform and brand

✓ opportunity to create new propositions by combining with

existing Abcam technology

✓ accretive deals with attractive return on capital / IRR

Supplementing organic growth through partnerships and acquisitions: Calico Biolabs


Formalin-fixed, paraffin-embedded

NSCLC (Non-small-cell lung carcinoma)

tissue stained for PD L1 using Anti-PD-L1

antibody [CAL10] (ab237726) at 0.3

µg/ml dilution in immunohistochemical

analysis. Positive staining (Left panel) and

negative staining (Right panel).

http://www.calicobio.com/home.html

19

12 2557

98

217

05 07 09 12 16 17 23E

Global Reported Revenue, £m

Confident in sustaining our long-term growth trajectory

2y

2y

3y

5y

6y • Enduring demand for

proteomic research tools

• Global market leader of

research antibodies opening

up new related markets

• Unique capabilities support

continued share gains

• Focused on major growth

opportunities in TAM of ~$8bn

• Investing to support

opportunity

19

Fiscal year


Additional Information

22

-

20.0

40.0

60.0

80.0

100.0

120.0

H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1

FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY

2019

Re

ve

nu

e £

m c

alc

ula

ted

fix

ed

exc

ha

ng

e r

ate

s

Added pre-FY2004 Added FY2004 Added FY2005 Added FY2006 Added FY2007 Added FY2008 Added FY2009 Added FY2010 Added FY2011

Added FY2012 Added FY2013 Added FY2014 Added FY2015 Added FY2016 Added FY2017 Added FY2018 Added FY2019

Cohort catalogue revenue by financial year


23

Foreign exchange – modest FX benefit in H1

Reported Catalogue

revenue growth

H1 2019: £117.0m

H1 2018: £105.2m

+11.2%

+10.8%

Total reported

revenue growth

H1 2019: £124.7m

H1 2018: £112.5m

Foreign Currency Movements

1.32

1.291.271.281.291.301.311.321.33

H1 18 H1 19

USD/GBP (48.6% of rev)

8.76

8.88

8.60

8.70

8.80

8.90

H1 18 H1 19

RMB/GBP (16.1% of rev)

1.121.12

1.10

1.11

1.12

1.13

1.14

H1 18 H1 19

EUR/GBP (19.4% of rev)

147.5

145.1

143

144

145

146

147

148

H1 18 H1 19

JPY/GBP (6.4% of rev)

Note: average exchange rates in period


24

70.6%

21.0%

5.7%

1.2% 0.9% 0.5%

USD GBP EUR RMB JPY Other

Breakdown of H1 2019 revenue, cost of sales and expense by currency

48.6%

4.9%

19.4%

16.1%

6.4%4.5%


Revenue

by currency

30.9%

51.4%

0.7%

12.2%

2.6% 2.2%


Expenses

by currencyCost of sales

by currency


25

Capex ratio expected to start to reduce from above average levels from 2019/20

4.0 6.5 8.6 8.5 7.03.5

1.07.0 8.9

18.8

15.7

(H1)

1.7

11.6

5.8% 5.2%

9.1%8.8%

16.0%

~11-13%

0%

5%

10%

15%

20%

0

10

20

30

40

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19e

Core (ex. IT) ERP/IT HQ Capex / revenue

Total capex spend, £m

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1

(1) Includes capitalised R&D, laboratory equipment, office & computer equipment

(2) Adjusted for £0.6m reclassification in 2016/17

(3) Details provided in additional information section

2

» D&A expense expected to increase in 2018/19 and again in 2019/20 as a result of

implementation of Oracle Cloud ERP, completion of UK HQ, and the introduction of

IFRS16 in 20203


26

• IFRS16, ‘Leases’ is effective from the Group’s 2019/20 financial year and

has the most significant impact for lessees.

• The most significant changes are that the Group will recognise an asset

and a corresponding liability for all leases currently accounted for as

operating leases. Exceptions are leases for a short period (less than 12

months) or where the underlying asset value is low.

• The operating lease cost which the Group currently incurs will be

replaced by a depreciation charge on the asset (over the term of the

lease) as well as an interest charge on the liability over the same period.

• The Group therefore anticipates that the adoption of IFRS16 will have a

significant impact on the primary financial statements, which will impact

on operating profit, profit before tax, total assets and total liabilities lines.

• The Group has conducted a review of its lease contracts and based on

the operating leases in place at 30 June 2018, including the new Group

HQ as well as judgements over expected extension options on all of its

leases.

• At transition, the Group expects a decrease in net assets of up to £5m. In

the years after transition the impact on the Group’s income statement

will be an increase in operating profit as a result of removing the

operating lease expense net of the new depreciation charge. The

overall impact to the Group’s reported profit after tax is expected to be

immaterial, with a small net decrease in the initial years after transition

which will reverse in later years as the leases in existence at transition

come closer to ending.

• The final transition impact may differ from the above guidance

depending on business decisions made during the period to 30June

2019.

IFRS 16 impact from FY2019/20

£’m FY20e FY21e FY22e

Operating

expenses~6.0 ~6.0 ~6.0

EBITDA ~6.0 ~6.0 ~6.0

Operating

expenses -

depreciation

~(4.7) ~(4.5) (~4.3)

Operating profit ~1.3 ~1.5 ~1.7

Finance costs ~(2.3) ~(2.0) ~(2.0)

Profit before tax ~(1.0) ~(0.5) ~(0.3)

£’m FY20e FY21e FY22e

Total Assets ~50 ~45 ~40

Total Liabilities ~55 ~50 ~46

Net Assets ~(5) ~(5) ~(6)


27

• Abcam makes, sources and sells a range of highly

validated biological binders and assays to help study

important targets in critical biological pathways

• We offer over 110,000 products to research protein

targets across antibodies, proteins, lysates,

biochemicals, kits and assays

• ~47% of our revenue is generated from our own

products and innovation

• >50% of our top-selling products are innovations from,

and manufactured by, Abcam

• Team of 1,100 working globally across eleven locations,

including five production sites

Facts about our business:

26


abcam plc interim results for the six months ended 31...

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